Starter Home Prices Are Rising the Fastest

Entry-level home prices are rising faster than homes on the higher end, the Houston Chronicle reports.

Prices for the least expensive homes have surged compared to the most expensive, according to real estate data company CoreLogic, as prices in the bottom quarter have grown twice as quickly as those in the top quarter since March 2011.

Causes include an increase in investor demand, a decrease in affordable new construction and changes in demographics.

After the housing bust in 2008, the percentage of homes being purchased by investors surged. One out of five entry-level homes, defined as the most affordable quarter of homes available, are purchased by investors today, twice the rate recorded between 1999 and 2003. Big data has also made it possible for investors to buy homes quickly, en masse and in neighborhoods they are not familiar with.

At the same time, the share of newly built affordable homes has halved. Between 2015 and 2019, only 1.8 percent of affordable homes were new construction, down from 3.8 percent between 1999 and 2003. In contrast, roughly 13 percent of luxury homes sold in 2018 were newly built.

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